The Law Commission has released its recommendations for the
review of trust law, which, if taken on board, could clarify
and simplify procedures, make administration more
straightforward and reduce the need to go to court.
There are up to 500,000 trusts in New Zealand involving
thousands of people, including many farming families.
The Law Commission stated if a settler (owner) put property
or other assets into a trust, they no longer owned those
assets, which were now legally owned by the trustees, who had
to administer the trust for the benefit of beneficiaries.
Preston Russell Law lawyer Gareth Davis, of Invercargill,
said from his understanding of the summary of recommendations
from the Law Commission, he thought the proposed changes
would clarify trust rules and what could and could not be
done, as well as clarifying the legal duties, expectations
and rights of trust managers, trustees and beneficiaries.
''From what I have read, it is a comprehensive review.''
There was no difference between trusts that held urban-based
assets and those that held rural-based ones, such as family
farms, Mr Davis said.
''It has been about 60 years since they last did anything and
a lot has changed.''
One proposal would change the life of a trust from 80 to 150
years, he said.
''From a succession planning point of view, that makes it
easier to disperse the assets so it [the trust] can be wound
The recommendations would give the courts ''more teeth'' to
deal with issues such as one person using a trust to hide
assets from a third party, such as a spouse, or establishing
a trust but continuing to treat the assets as if that person
still owned them, Mr Davis said.
In its summary, the Law Commission said ''in some cases the
new Act would make it clear that the court had the power to
find that a trust had not been established''.
In the event of a marriage break-up or creditor claims in an
insolvency situation, other Acts, such as the Property
(Relationships) Act 1976 and the Family Proceeding Acts,
would come into play, it said.
However, it recommended the courts be allowed to remove
assets from a trust that would have ordinarily been
relationship property, to compensate a disadvantaged partner.
Law Commissioner Geoff McLay said some of the recommended
changes included giving a judge a ''more tailored and focused
tool'' in response to ''particular kinds of injustices'', and
could include taking property out of a trust to ''satisfy
compensation'' for a disadvantaged partner.
The Government had six months to consider if it would turn
the recommendations into a Bill and if it would allow public
consultation, he said.
There would be ''numerous opportunities for consultations''
during the Bill's progress.
Federated Farmers president Bruce Wills is cautiously
greeting the Law Commission's trust law recommendations.
''Trust law maybe highly complicated, but it is common within
agriculture as part of farm succession planning,'' he said.
''With upwards of one trust for every eight New Zealanders,
if the Law Commission's recommendations ultimately deliver
certainty, then that will be a good thing.
''When we say `certainty', it means that when people need to
rely upon a trust it stands up to scrutiny.
''Farmers can rest assured that Federated Farmers will be
seeking expert input on any legislative proposals that may
emerge in response to the Law Commission's recommendations.''
Review of trusts
The Law Commission's recommendations include:
- clarifying the list of documents that must be
- clarifying trustees' general obligations, duties and trust
- every trustee, except those whose trust deeds specify a
different approach, would have all the powers in relation to
the trust property that a person had if they owned the
- flexible powers to invest trust property to maximise
returns and delegate authority for investment decisions
- provide and clarify procedures for dealing with a trustee's
incapacity or death
- any new law should not invalidate existing trusts which
meet the requirements
- giving the courts a wider ability to set aside asset
transfers to resolve relationship property disputes
- Yvonne O'Hara